Lords welcome tipping bill but warn of ‘unintended consequences’

Peers in the House of Lords have welcomed a bill that would prevent employers making deductions from tips, but warned of ‘unintended consequences’.

 

The Employment (Allocation of Tips) Bill was introduced to the upper house for its second reading by Lord Robathan who said “This is a bill entirely about fairness… at the core of the bill is the creation of a legal obligation for employers to distribute all tips to workers without any deductions.”

 

The passage of the bill was welcomed by peers across the house and Lord Mitchell added: “It is a vital bill, and when it becomes an Act it will give certainty of earnings and security to many hundreds of thousands of people who work in the hospitality industry.”

 

But Mitchell did highlight a number of areas where he believed the bill could present a “risk of unintended consequences”.

 

The first concerned agency workers who, as the bill currently stands, would receive tips at the same level as directly employed staff.

 

Mitchell said: “It seems equitable that agency workers qualify for sharing in the tip allocation on the same basis as directly employed staff. But I am told that agency rates have now gravitated upwards, to the extent that there is now an implicit tipping share built into the daily fee. Therefore, if agency people also share in an establishment’s tips, does it not mean that, in effect, they get the benefit of the tip twice over? That cannot make sense.”

 

Lord Johnson of Lainston said the issue would be dealt with in a code of conduct, which will accompany the bill after it receives Royal Assent.

 

Mitchell also raised concerns about the inability for employers to deduct costs associated with the processing of credit card payments and a stipulation that would prevent tips being pooled across multiple venues under the same group.

 

Several peers said it would be preferable for hospitality to move away from a payment system that incorporates tips and service charge.

 

Baroness Deech said: “Will this legislation serve only to cement out-of-date pay practices that will serve to inhibit the hospitality industry’s recruitment efforts? Pricing and employment practices in that industry need to be brought into line with best practice. Instead of relying on tips, employers need to be able to set salaries that offer fair and competitive levels of pay and provide prospects for promotion, bonuses and recognition of long service.

 

“The employee needs to know exactly how much they will be earning and ensure that they benefit fully from pension and other pay-related benefits such as holiday and sickness pay. Those pay-related benefits should relate to their total earnings. Those full earnings should be liable for tax… Ideally, all prices quoted by service and hospitality businesses should be fully inclusive, with no additions expected. Customers would be relieved and grateful.”

 

Lord Bourne of Aberystwyth added: “This is not an attractive practice. What happens in Singapore, for example, where people just do not tip, has its attractions: then, the wage reflects the job that is done.

 

“However, we are where we are. I strongly support this measure, because I do not think that we will get to that position in the short term, and we need something that is fair to employees, as my noble friend said.”

 

The Employment (Allocation of Tips) will now progress to a House of Lords committee for further scrutiny.

 

Image: Shuttertock